The Russian government-operated oil company, led by Chief Executive Officer Igor Sechin, has been affected disproportionately by production cuts caused by the Russian invasion of Ukraine.
Rosneft PJSC, while being led by a close ally of President Vladimir Putin, has experienced its largest drop in production since the invasion began. Including its subsidiaries, the company has become the main source of Russia’s production cuts, totaling over half since the invasion.
Besides the United States and the United Kingdom, most western countries have not implemented bans on imports of Russian oil. Instead, the main cause for these cuts comes from shipping and insurance restrictions, weak demand within Russia, and the opposition to Russia’s aggression from foreign companies.
Midway through May, the oil output in Russia was 830,000 barrels per day lower than in February. Over half of the drop was attributed to oil produced from Rosneft products. As of April, the amount of idled wells owned by Rosneft increased from 17% to 30% compared to the beginning of this year. One of Rosneft’s subsidiaries, Bashneft, also idled over 55% of its wells last month leading the two companies to have the most idled wells compared to other Russian producers.
Production was hit hard when the US imposed an import ban on suppliers that heavily depended on exporting fuel oil to the Gulf Coast. As excess oil was being produced refineries had to pause production. Other Russian companies were not affected as hard by restrictions. For example, Gazprom Neft PJSC has been able to raise production amidst the war.
More recently, the oil industry in Russia is beginning to adjust to the restrictions, and export rates are looking to increase, including for Rosneft. This jump in production could stem from new export deals with Asia and a stabilization of the domestic demand for fuel according to the head of an analytics firm, Viktor Katona.
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